CMS releases plans to strengthen Medicaid demonstration project spending

The Centers for Medicare & Medicaid Services June 11 released guidance detailing plans to implement new guidelines and standards for determining budget neutrality for Medicaid section 1115 demonstrations, which give states flexibility to design and test experimental approaches to Medicaid, including modifying eligibility, benefits, delivery systems and coverage, in ways not otherwise permitted under standard Medicaid authority. The guidance is intended to support implementation of a statutory requirement under the July 2025 reconciliation bill that the CMS Chief Actuary certifies that a demonstration is projected to be budget neutral, meaning it would not increase federal Medicaid spending relative to what expenditures would have been absent the demonstration. CMS said it plans to issue a rule with its proposed changes to budget neutrality.